TORONTO — Shopify’s stock fell sharply in early trading Thursday as the commerce company forecast slower-than-expected profit growth in the current quarter, despite a fast start to the year. 

The Ottawa-headquartered firm reported US$2.36 billion in revenue between January and March, up 26.8 per cent year over year and ahead of analysts’ consensus estimates of US$2.33 billion as compiled by Visible Alpha. Shopify made a US$226 million net profit, once it factored out losses from the falling share prices of other companies in which it holds stakes. That was slightly lower than the US$257 million analysts were expecting. 

Here’s what you need to know about the company’s earnings.

Tariff trouble: Markets have been watching to see when the Trump administration’s trade war would hit Shopify, as the U.S. removes the duty-free de minimis exemption on which many small businesses rely. 

On an earnings call Thursday, Shopify executives downplayed the impact. “We’re of course monitoring for potential slowdowns, but our data through April shows little evidence of that,” said president Harley Finkelstein, adding “we cannot predict what administrations around the world will do.”  

Shopify CFO Jeff Hoffmeister insisted the firm’s client base isn’t doing as much international trade as everyone thinks. About 15 per cent of gross merchandise volume (GMV), a measure of customers’ sales using Shopify’s technology, was cross-border in the first quarter, and about half of that involved a purchase that started or ended in the U.S. 

U.S. President Donald Trump’s move to cut the de minimis on shipments from China “is not expected to have a meaningful impact on Shopify in the near term,” Hoffmeister said, adding that affected transactions account for just one per cent of GMV.

Still, Shopify’s securities filings used the phrase “trade wars” for the first time in listing the risks to its business, noting that threats or increases in tariffs, barriers and other restrictions could hurt both its merchants and broader economic growth.

Investors reacted poorly to Shopify’s outlook for the second quarter. The firm predicts its gross profits will “grow at a high-teens percentage” year over year; analysts were expecting an increase of 22.7 per cent before Shopify reported. The firm’s share price dropped more than eight per cent in pre-market trading, but recovered later in the morning. 

Despite the tariff threat, Shopify expects revenue to increase at “mid-twenties percentage,” a level it’s consistently kept up for the last three years. Analysts were expecting growth of 24.1 per cent per cent. Hoffmeister acknowledged that concerns about consumer spending and global economic conditions factored into Shopify’s projections.

Finkelstein talked up the firm’s role in the trade war. “Our platform is designed to handle changes like navigating tariffs quickly and efficiently, making us the go-to choice for merchants,” he said, claiming Shopify adapts its tools to customers’ needs faster than older software providers or large businesses using in-house technology. 

He cited features like country filters in the Shop app that let shoppers buy locally, as well as tools that allow clients to easily calculate duties at checkout. 

Growth story: Shopify makes money when its merchants do, by taking fees for services like payment processing, shipping and loans. Clients sold almost US$74.8 billion worth of products and services using the firm’s technology in the first quarter, up 22.8 per cent from the same period last year. 

Analysts had been expecting gross merchandise volume to be US$74.1 billion. While Shopify is best known for its e-commerce software, its customers increased sales particularly fast offline in the first quarter. The firm’s European clients outgrew the rest. 

Machine-made: Shopify CEO Tobi Lütke’s edict that staff should reflexively use AI in their work made waves in the business world last month, with other tech bosses following with similar instructions.

Merchant use of the firm’s Sidekick assistant on a monthly basis has doubled this year after Shopify improved its ability to reason, Finkelstein said. Shopify has also launched an AI-powered tool that tells clients what tariff rate their products would face based on where they’re coming from and a text description of the item.

Executives say the biggest opportunity might be in AI-driven shopping. Last month, OpenAI made it easier for users to buy things in ChatGPT. As consumers use chatbots rather than search engines to find information and products, they may spend less time on the online stores of Shopify merchants, or in its Shop app. 

But Finkelstein said the firm will ensure its clients show up wherever buyers are, citing agreements with OpenAI and Perplexity. It’s an extension of what Shopify did when shopping shifted onto social platforms like Instagram and TikTok.